STOCKCHART SCTRS SHOW HOMEBUILDERS TO BE DAY'S STRONGEST GROUP -- DOW JONES HOME CONSTRUCTION ISHARES HAS BIGGEST SCTR JUMP TODAY -- INDIVIDUAL HOMEBUILDERS WITH HIGHEST SCTR RANKINGS (AND STRONGEST CHART PATTERNS) ARE NVR, TOLL BROTHERS, AND PULTEGROUP

APPLYING SCTR LINE TO HOME CONTRUCTION ISHARES ... SCTRs are one of the most helpful ways to find new leaders in the stock market. SCTRs stand for StockCharts Technical Rank which is a number between 0 and 100 that determines a market's relative strength. The numbers are derived from a formula developed by Stockcharts based on a combination of technical indicators. There are a couple of ways to use the SCTRS. One is to look for ETFs, or stocks, that show high relative strength rankings. Another way is to look for markets that are starting to show new relative strength. Today's Home Page, for example, shows a number of boxes based on SCTR rankings. The ETF SCTRs box lists today's top 10 ranked ETFs. The first column lists the ETFs with the highest SCTR rankings (including solar, pharma, aerospace and defense, and biotech) that have been market leaders for awhile. All 10 have SCTR rankings of 99. By clicking on the Top up column, however, you can view the ETFs that are experiencing the biggest gains today. Today's top performing ETF happens to be ITB which is the Dow Jones U.S. Home Construction iShares. Although it has a low SCTR ranking of 44, it is today's top gainer. You can simply click on the ITB to see its chart. Chart 1 shows the ITB surging 3% today and moving close to challenging a "neckline" drawn over its July, September, October highs. An upside breakout could be imminent. The black line below the chart is a visual representation of its SCTR line. [The SCTR line can be found under the chart "indicators" column]. The SCTR line shows relative weakness by the homebuilding group since May. The SCTR line is jumping to 44 today (see circle) and may be ready to challenge resistance at 50. An upside breakout in the SCTR line would confirm an upside breakout in the ETF itself. You could have found all of this out simply by checking the ETF SCTRs box this morning.

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Chart 1

USING SCTR RANK TO FIND HOMEBUILDER LEADERS... You can also use SCTRs to find stock leaders within a rising ETF. Three of the top five percentage gainers today in the S&P 500 are homebuilders -- Lennar (LEN), Horton (DHI), and PulteGroup (PHM). LEN, however, has a low SCTR rank of 12, while DHI is an even lower rank of 6. When looking at a group that's just starting to rise, it's better to look at stocks with the highest SCTR rankings (and moving higher). NVR has one of the highest SCTR ranks at 37. Chart 2 shows the stock trading at a new five-month high after exceeding its 200 day average. Its SCTR line (below chart) is trending higher. The highest SCTR rank (40) belongs to Toll Brothers (TOL). Chart 2 shows TOL right up against its "neckline". It too has cleared its 200-day line. Its SCTR line also rising.. Chart 4 shows PulteGroup (PHM) moving above its 200-day line. Its SCTR line has risen to 21, which gives it the third highest SCTR ranking in the homebuilding group. Today's ETF SCTRs alerted us to heavy buying in the homebuilding group. The SCTR rankings then helped us isolate individual homebuilders with the highest relative strength rankings (which usually have the strongest chart patterns). That helps ensure that you're only looking at the strongest stocks in the strongest ETF. The use of SCTRs makes that task a whole lot easier.

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Chart 2

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Chart 3

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Chart 4

WHERE TO FIND MORE INFO ON SCTRS... A line below the SCTR boxes on the Home Page offers "complete SCTR Rankings". By clicking on that label, you'll be taken to SCTR rankings for individual stocks in the S&P 500 (along with some other indexes) by sector and industry. You can see each stock's SCTR ranking. You can also click on the "change" button to see today's leaders. By clicking on the blue label "View StockCharts Technical Price Rankings" you'll be taken to a more in-depth explanation of how SCTRs are calculated. You may find it interesting reading.